Category: Trade

The U.S. agricultural trade outlook for 2025 is clouded with uncertainty driven by both global economic dynamics and domestic policy shifts. As shown in Figure 1 below, the USDA projects that agricultural exports could reach $170 billion—a slight decrease from the 2024 calendar year. Imports are expected to reach a record $215.5 billion. If both projections are accurate, these trade patterns would result in a record $45.5 billion agricultural trade deficit.

Figure 1: USDA Outlook for Agricultural Trade

However, prospective changes in domestic trade policy loom large over these projections. The incoming Trump administration has signaled plans for sweeping tariffs, including a proposed 60% tariff on Chinese goods and a 10% tariff on all other imports. These measures aim to protect domestic industries, but they risk triggering retaliatory tariffs from key trade partners. A resurgent trade war could severely restrict access to critical export markets, particularly China, the largest buyer of U.S. soybeans prior to the previous trade war. Retaliatory actions could further depress already struggling commodity prices and deepen challenges for U.S. farmers.

The USDA’s outlook underscores that exports to traditional markets such as Mexico and Canada are forecasted to remain strong, driven by demand for corn, beef, and dairy. However, exports to China are expected to decline further, exacerbated by weakened soybean demand and competition from Brazilian suppliers. At the same time, the anticipated tariffs could raise costs for imported agricultural inputs, further squeezing U.S. producers. 

The broader economic context offers mixed signals. Easing inflation and steady global GDP growth may support international demand for U.S. agricultural products. However, a strong dollar continues to challenge U.S. export competitiveness, particularly as other nations’ currencies depreciate. Another main contributor to the loss of competitiveness of U.S. agricultural products in the international arena is the increase of cost of production in recent years. In 2018, U.S. farmers spent a total of $354 billion on inputs, however, by 2023 farmers spent $481.9 billion, an increase of 36 percent.

The long-term impact of the Trump administration’s trade policies remains to be seen, but the path forward will require balancing protectionist strategies with the need to maintain and grow critical trade relationships to support the agricultural sector.

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Schaefer, K. Aleks, and Luis Ribera. “2025 U.S. Agricultural Trade Outlook: Navigating Uncertainty Amid Policy Shifts.” Southern Ag Today 5(2.4). January 9, 2025. Permalink

The European Union (EU) and Mercosur (Brazil, Argentina, Uruguay, and Paraguay) signed a trade agreement on December 6, 2024, after more than 25 years of negotiations. The agreement, yet to be ratified, has the potential to become the most significant EU partnership, encompassing over 700 million people. It emerges amid the U.S. discussion of raising tariffs. 

Highlights for Agriculture

The flow of agricultural products is more significant from Mercosur to the EU, as illustrated in Figures 1, 2, and 3. The EU-Mercosur Trade Agreement introduces significant changes to agricultural trade by establishing quotas and reducing tariffs over a phased period^[1], providing greater access to Mercosur countries.  For beef, an additional quota of 99,000 metric tons (CWE) will be introduced over five years with a 7.5% tariff, while the existing Hilton Quota (10,000 metric tons) will become tariff-free upon the agreement’s implementation. Poultry exports will benefit from a 180,000 metric ton (CWE) quota, phased over five years, with zero tariffs, while pork will have a 25,000 metric ton quota with a fixed tariff of €83 per metric ton, implemented over five years.

The agreement also includes quotas for sugar (180,000 metric tons with zero tariffs, including 10,000 metric tons reserved for Paraguay), ethanol (450,000 metric tons duty-free for industrial use), and corn (1 million metric tons at zero tariffs, increasing over five years). A 60,000 metric ton quota for rice will start at zero tariffs and gradually increase over five years. Additionally, orange juice tariffs will be eliminated over seven to ten years, with a 50% preferential margin during the transition. These provisions aim to expand market access for Mercosur’s agricultural exports while aligning with EU tariff structures.

Sustainability: Both blocs committed to following the Paris Agreement, combating deforestation, and reducing greenhouse gas emissions. The EU committed to using data from Mercosur authorities to assess Mercosur’s compliance with the requirements established by European bloc legislation. 

Challenges Ahead

The signing of the EU-Mercosur trade agreement represents a significant milestone. However, the agreement may face political challenges in the future. The EU member states and the European Parliament must review and approve the final text. France and Poland are likely to express opposition to the agreement. Additionally, the Mercosur nations will need to ratify the agreement in their respective congresses.

Implications for the United States

The EU-Mercosur trade agreement introduces competitive challenges for U.S. agricultural exporters by granting Mercosur countries preferential access to European markets and strengthening the EU’s position in Mercosur. Commodities such as beef (Fig. 1), corn/peanuts (Fig. 2), and soybeans (Fig 3) will face increased competition, with Mercosur benefiting from reduced tariffs and expanded quotas in the EU. At the same time, the agreement allows European goods to gain a stronger foothold in Mercosur countries, reducing U.S. export opportunities in high-value sectors like processed goods and dairy. The deal further challenges the U.S.’s ability to compete globally by setting a precedent for trade norms.

Figure 1 – 2023 Livestock Export Values by Product and Region (FOB, $ Millions)

Figure 2 – 2023 Crop Export Values by Product and Region (FOB, $ Millions)

Figure 3 – 2023 Soybeans Export Values by Product and Region (FOB, $Millions)

^[1] Sources: https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/mercosur/eu-mercosur-agreement/factsheets-and-guides_en

https://agenciabrasil.ebc.com.br/economia/noticia/2024-12/entenda-como-ficam-exportacoes-agricolas-apos-acordo-mercosul-ue

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Calil, Yuri, and Pancho Abello. “EU-Mercosur Trade Agreement.” Southern Ag Today 4(52.4). December 26, 2024. Permalink

In our previous analysis, we explored the overall impact of potential trade policy shifts on Southern U.S. agriculture, highlighting significant risks to critical commodities. However, these impacts will vary widely across different states. This analysis focuses on the state-level effects, examining how the worst-case trade policy scenario (Scenario 2 in our previous study) could affect agriculture across individual states within the Southern U.S.

Our analysis focuses on the most extreme trade policy scenario following the 2024 U.S. presidential election. In this worst-case scenario, the U.S. imposes a 60% tariff on Chinese goods and a 10% tariff on imports from other countries. This could provoke severe retaliatory measures from China, including a 60% tariff on U.S. agricultural exports and additional tariffs from other trading partners. These disruptions could significantly impact Southern agriculture, a region heavily dependent on foreign markets. The impact would vary by state, depending on each state’s reliance on specific export markets. By focusing on this worst-case scenario, our analysis highlights the localized risks each Southern state might face.

Our analysis reveals significant economic vulnerabilities at the state level, particularly in critical agricultural commodities. As shown in Figure 1, Texas emerges as the most impacted state, with a projected total trade loss of $3.2 billion. The cotton industry could see an export decline of $847 million, while the beef and dairy sectors are expected to lose $340 million and $184 million, respectively. These figures underscore Texas’s heavy reliance on these major agricultural products, making it highly susceptible to trade disruptions that could severely affect its economy.

Arkansas and North Carolina also face substantial economic challenges as well, with total projected losses of $2.0 billion and $1.8 billion, respectively. As shown in Table 1, Arkansas’s soybean industry could see a decline of $567 million in export value. The poultry and pork sectors in North Carolina are particularly vulnerable, with expected losses of $258 million and $281 million, respectively. These sectors are critical to the state’s agricultural output, and such large-scale impacts could have far-reaching consequences for producers and the broader regional economy.

Other Southern states are similarly at risk, with significant commodity-specific losses under the worst-case scenario. For example, Georgia’s cotton and poultry industries could see combined losses exceeding $600 million, with cotton alone projected to decline by $345 million, as detailed in Table 1. Alabama’s poultry sector is expected to suffer a $213 million loss, a significant blow to the state’s agricultural revenue. Kentucky’s soybean exports could also drop by $350 million, while Oklahoma’s wheat and livestock sectors face a combined projected loss of $386 million. These projected trade impacts emphasize the profound impact trade policy shifts could have on critical agricultural commodities across the region.

Our analysis highlights the severe economic impact that potential trade policy shifts could have on Southern U.S. agriculture under the worst-case trade policy scenario. Texas could face losses of $3.2 billion, with significant hits to its cotton, beef, and dairy industries. Arkansas and North Carolina also stand to lose billions, especially in soybeans, poultry, and pork. These figures underscore the urgent need for targeted, state-specific strategies to mitigate these risks and support the most affected sectors. Policymakers must address these vulnerabilities to safeguard the region’s agricultural economy.

Figure 1. 2025 State-Level Export Loss Projections for the Worst-case Scenario.

Table 1. Projected 2025 Export Losses by Commodity and State for the Worst-case Scenario (million $).

Learn More

Kim, D., Steinbach, S., Yildirim, Y., & Zurita, C. (2024). Understanding Trade Strategy Impacts on Soybean Exports and Farm Income in North Dakota. CAPTS White Paper 2024-01. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4920301.

Goyal, Raghav, Sandro Steinbach, Yasin Yildirim, and Carlos Zurita. “Trade Policy Scenarios after the U.S. Presidential Election and What They Could Mean for Southern U.S. Agriculture.” Southern Ag Today 4(44.4). October 31, 2024. https://southernagtoday.org/2024/10/31/trade-policy-scenarios-after-the-u-s-presidential-election-and-what-they-could-mean-for-southern-u-s-agriculture/

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Goyal, Raghav, Sandro Steinbach, Yasin Yildirim, and Carlos Zurita. “State-Level Effects of Potential Trade Policy Shifts on Southern U.S. Agriculture.” Southern Ag Today 4(50.4). December 12, 2024. Permalink

On September 28, India lifted its export ban on non-basmati white rice and replaced it with a minimum export price (MEP) policy of $490/metric ton. On October 20, India announced the removal of the MEP policy on non-basmati white rice and the removal of export duties on other rice products (e.g., parboiled, husked, and paddy rice), effectively freeing rice exports. While this measure was expected anytime and the global rice market was already factoring in the change to some extent, the announcement is creating shockwaves throughout the global rice market.

India implemented the export ban on July 20^th, 2023 (see https://southernagtoday.org/2023/07/27/shaking-the-global-rice-market-india-bans-exports-of-white-non-basmati-rice/) amid fears of a short rice crop due to the projected dry Monsoon that never materialized. India harvested a record rice crop (137.8 million metric tons) in 2023/24, but the export ban remained in place. Fast-forwarding to the current year 2024/25, the weather has been beneficial, and India is projected to harvest a new record crop (estimated at 142 million metric tons in October according to USDA) and carry record-high stocks. In summary, India’s production performance has been outstanding, which undermined the rationale for keeping the export ban for so long. 

Since late September when India started easing exports, Asian rice prices have been under downward pressure despite the strong import demand, primarily from Indonesia and the Philippines. For instance, the export price of Thai 5% rice dropped below $500/metric ton in mid-October for the first time since July 2023 (Creed Rice Market Report, 2024; USDA, 2024a), while that of Pakistani 5% rice dropped more drastically as Pakistan competes more directly with India in many African markets. The latest Creed Rice Market Report (November 6^th) suggests India’s export price for non-basmati white 5% rice is around $465/metric ton.

In contrast, rice prices in the Western hemisphere are still at a much higher level than those in Asia, and the downward pressure has not been felt so hard, at least not yet. For example, the average export price for Southern 4% long-grain rice average $779/metric ton in 2023/24 and has hovered around $800/metric ton since August. Export prices out of Mercosur have also fluctuated between $770-790/metric ton in the last few weeks. While Western hemisphere long-grain rice has historically enjoyed a price premium relative to Asian long-grain rice, we should expect an increasing downward price pressure in the coming weeks and months as India’s rice harvest and the Mercosur’s rice crop advances.

The million-dollar question for the U.S. rice industry is how will prices adjust this coming year, and the answer is: it depends. First, it will depend on the (most likely) downward adjustment in Asian export prices, which in turn depends (among other things) on how much rice India exports. A quick analysis using the Arkansas Global Rice Model (AGRM) and assuming India exports according to USDA projections in October (21 million metric tons) bring prices to $450/metric ton. However, if India decides to liquidate some stocks as well further increasing exports, prices may drop even further. Second, it will depend on the level of market integration with Asia. While historically Asian rice has not been prominent in the Western hemisphere, its presence is growing. The more market integration, the more pressure we should expect to receive, and an increasing price gap between Asian and Western Hemisphere rice could fuel market integration. Third, it will depend on the rice crop in Mercosur (South American countries that compete with U.S. long grain rice). USDA projects a slight increase in planted area relative to last year, which could result in more competition in core U.S. export markets.

Finally, it is important to discuss how much room there is for price adjustments and profitability. The November WASDE report (USDA, 2024b) maintains long-grain farm prices unchanged at $14.50/hundredweight ($319/metric ton). Using that farm-price as a reference and the University of Arkansas Division of Agriculture 2025 Rice Enterprise Budgets (Figure 1), we estimate the average net returns to range from $22.25 to $103.28/acre for the different rice production systems, significantly lower than last year’s net returns, which ranged from $97.50 to $153.70/acre. We estimate the 2025 breakeven prices to range from $13.26 to $14.22/hundredweight (cwt) across production systems. The downward pressure on prices due to India’s liberalization of rice exports could push farm prices further down in the coming months, which could further decrease the economic returns and affect the 2025 rice planting intentions.                      

Figure 1. Arkansas: Projected 2025 Net returns and Breakeven Price.

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References

Creed Rice Market Report. 2024. Several issues. Available at https://www.riceonline.com/

University of Arkansas Division of Agriculture. 2024. 2025 Arkansas Crop Enterprise Budgets. Available at https://www.uaex.uada.edu/farm-ranch/economics-marketing/farm-planning/budgets/crop-budgets.aspx

USDA. 2024a. Rice Outlook. October 2024. Available at https://www.ers.usda.gov/publications/pub-details/?pubid=110218

USDA. 2024b. WASDE Report. November 2024. Available at https://www.usda.gov/oce/commodity/wasde

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Durand-Morat, Alvaro. “What to Expect from India’s Removal of the Export Ban on White Non-Basmati Rice.” Southern Ag Today 4(46.4). November 14, 2024. Permalink

The outcome of the upcoming presidential election could reshape U.S. trade policy, directly impacting Southern U.S. agriculture. With its dependence on exporting commodities like soybeans, cotton, and poultry, the region faces uncertainty as potential policy shifts loom. Historically, Southern agriculture has been sensitive to changes in trade policies, as seen during recent trade conflicts like the U.S.-China trade war, which led to substantial income losses for farmers and ranchers across the region. Understanding how those new trade policy scenarios, as summarized in Table 1, might unfold is crucial for preparing Southern farmers and agricultural businesses for a turbulent period in global trade.

One possible scenario comes from the Biden administration’s 2024 decision to impose a 20% (trade-weighted) tariff on Chinese electric vehicles and other critical sectors. In response, we could see commodity-specific tit-for-tat trade retaliation from China in 2025, potentially involving a 20% tariff on U.S. agricultural exports. While this scenario is aggressive, it would likely remain a bilateral conflict between the U.S. and China, much like the 2018-2019 trade dispute that significantly impacted U.S. farmers, particularly those in the Southern states.

A more extreme scenario would be for the U.S. to impose a 60% tariff on Chinese goods and a 10% tariff on imports from all other countries. Those who believe that taking a protectionist stance on trade is the best way to increase U.S. jobs have suggested this trade policy approach. However, such a move would almost certainly provoke a strong reaction, with China likely imposing a 60% tariff on U.S. agricultural products and other countries also raising their tariffs on U.S. goods by 10%. The U.S. South’s heavy reliance on foreign markets could create severe disruptions in global trade, with the region’s agriculture being particularly hit.

A third scenario could involve the U.S. Congress revoking China’s Permanent Normal Trade Relations (PNTR) status, which some lawmakers believe is necessary for national security and economic reasons. This could result in a 9.5% increase in tariffs on Chinese goods. In this scenario, China is expected to respond with an equivalent tariff on U.S. agricultural exports. Although this scenario focuses more on the U.S.-China relationship, it presents significant risks for Southern agriculture.

Table 2 presents each scenario’s projected export losses. Southern agriculture is closely tied to global markets, with key exports like soybeans, cotton, poultry, and livestock playing a pivotal role. Take soybeans, for example. This crop is central to agriculture in Arkansas, Mississippi, and Kentucky. Under the first scenario, we estimate soybean exports could fall by 32.6%, or about $1.2 billion. The third scenario presents a more moderate decline of 15.5%, equating to a loss of approximately $0.6 billion. If the second, more extreme scenario were to unfold, soybean exports could drop by a staggering 67.6%, which translates to a loss of $2.4 billion. Such a decline would likely lead to excess soybeans in domestic markets, pushing prices down and putting financial pressure on farmers.

Cotton, another critical crop for Southern states like Texas, Georgia, and Arkansas, would also face serious challenges. Under the first scenario, cotton exports could decrease by 8.4%, leading to a $0.5 billion loss. The third scenario predicts a 4% decrease, amounting to a loss of around $0.2 billion. The drop could be as high as 38.8% in the second scenario, or $ 2.1 billion. These losses could have ripple effects throughout the regional economy, squeezing farm incomes and adding financial stress. The poultry industry, vital to Georgia, North Carolina, and Alabama, would not be spared. In the first scenario, poultry exports might shrink by 8.8%, while in the second scenario, the decrease could reach 38.2%. This would amount to billions in lost revenue, hitting rural economies hard.

Potential trade policy scenarios following the U.S. presidential election could considerably affect Southern U.S. agriculture. While the exact outcomes will depend on the policies that are ultimately implemented, the risks to the Southern agricultural economy are clear. By diversifying export markets, investing in value-added agriculture, strengthening domestic markets, and advocating for supportive trade-relief programs, Southern U.S. states could better position themselves to deal with the challenges posed by these potential shifts in trade policy. Southern agriculture must be prepared and adaptable in the face of these uncertainties, ensuring it can thrive in an increasingly competitive global market disrupted by protectionist trade policies.

Learn More

Kim, D., Steinbach, S., Yildirim, Y., & Zurita, C. (2024). Understanding Trade Strategy Impacts on Soybean Exports and Farm Income in North Dakota. CAPTS White Paper 2024-01. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4920301.

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Goyal, Raghav, Sandro Steinbach, Yasin Yildirim, and Carlos Zurita. “Trade Policy Scenarios after the U.S. Presidential Election and What They Could Mean for Southern U.S. Agriculture.” Southern Ag Today 4(44.4). October 31, 2024. Permalink